Medvedev in Crimea as Ukraine Rejects Russia Proposal. Prime
Minister Dmitry Medvedev arrived in Crimea in the first visit by a top
official since Russia annexed the peninsula, as Ukraine rejected the
Kremlin’s demands that it grant its regions greater powers.
Medvedev’s trip today came just hours after U.S. Secretary of State John
Kerry demanded Russia pull its forces back from Ukraine’s border at
talks in Paris with Russian Foreign Minister Sergei Lavrov, saying they
are “creating a climate of fear and intimidation in Ukraine.” Lavrov
demanded that Ukraine should
devolve power to give its regions more autonomy and ensure the
rights of Russian speakers.

IMF Says European Banks Had Up to $300 Billion Subsidy. Large banks in the euro area
benefited from as much as $300 billion in implicit public
subsidies four years after the global financial crisis because
of investors’ expectations that governments would not let them fail, according to the International Monetary Fund.

European Stocks Climb After Weekly Gain as Novartis Rises. European advanced, after the
biggest weekly gain in more than a month, as investors awaited
economic data out of Europe and America later this week. Novartis AG climbed 3.5 percent after the Swiss drugmaker
said the last phase of a clinical trial showed a treatment for
chronic heart failure helped patients live longer. Banca Monte
dei Paschi di Siena SpA jumped to a 14-month high after its
biggest investor said it is selling an additional stake. RWE AG
lost 1.3 percent after UBS AG recommended avoiding the stock. The Stoxx Europe 600 Index added 0.2 percent to 334.31 at the close of trading in London.

Hedge Fund Letters to Tell of Favorite Trades Unraveling.
Pity the poor folks who have to write letters to investors on behalf of
equity-focused hedge funds this month. Various measures of
performance indicate the alternative investment vehicles may have a lot
of explaining to do in March. The Global X Guru Index ETF (GURU),
which aims to mimic returns of the top hedge-fund stock holdings, has
lost 2 percent this month for its worst performance versus the Standard
& Poor’s 500 Index since it was created in 2012.

Wall Street Journal:

South Korea Fires Back at North Amid Pyongyang's Drills. Shells From Both Countries Fell in the Sea, South Korean Official Says. North Korea fired artillery across its
maritime border with South Korea in the Yellow Sea on Monday as part of a
military drill, prompting South Korea to return fire in the latest
reminder of the unstable security situation on the Korean peninsula. The
latest provocation from Pyongyang came just as the U.S. and South Korea
conducted a large-scale joint military exercise focused on amphibious
operations in South Korea.

Russia’s Sovereign Bond Rating May Be Cut, Moody’s Says. Russia’s government bond rating was
put on review for downgrade by Moody’s Investors Service, which
cited a weakening economy amid the conflict with Ukraine. The ratings company said if the review leads to a
downgrade, the most likely outcome would be a one-level
adjustment. Russia’s Baa1 rating is the third-lowest investment
grade.

McCain Looks to U.S. Companies in Russia If Putin Pushes. The
U.S. should consider forcing major American companies such as General
Electric (GE:US) and Exxon Mobil to suspend business in or pull out of
Russia if President Vladimir Putin attempts to take more territory from
Ukraine or
other neighboring nations, said Senator John McCain of Arizona.

Abe Bliss Broken as Foreigners Flee Topix in Biggest Drop. In
just one quarter, the developed world’s biggest stock rally has given
way to its worst slump. Japan’s Topix index, up 51 percent last year,
has fallen 8.9 percent in the three months since, almost twice as much
as the next-worst market, Hong Kong. The retreat is emboldening
short sellers, whose trades made up as much as 36 percent of daily Tokyo
Stock Exchange volume this month. Foreign
investors sold 975 billion yen ($9.5 billion) of Japanese shares in one
week in March, the most since the crash of 1987.

Japan Industrial Output Unexpectedly Drops as Tax Hike Looms. Japan’s industrial production fell in February, undershooting all
forecasts by economists surveyed by Bloomberg News, as the first
sales-tax increase since 1997 risks stalling recovery in the world’s
third-biggest economy. Output fell 2.3 percent from the previous
month, the steepest drop in eight months, the trade ministry said in
Tokyo today. The median estimate of 28 economists was for a 0.3 percent
gain.
A separate gauge of manufacturing fell in March for a second straight
month.

China Defaults Sow Property Cash Crunch Concern: Distressed Debt.
The specter of default in China's trust loans market is deepening the
distress of property developers that also borrowed in dollars. Eighteen
companies owning $15.2 billion, from behemoth China Vanke Co. to
junk-rated Glorious Property Holdings Ltd., have "material exposure" in
excess of 10% to trust financing, a form of non-bank lending that's
helped homebuilders proliferate in China, Moody's Investors Service
said. This year alone, the number of bonds from Chinese developers
considered distressed based on their yields has almost doubled to 18.
Part of China's $7.5 trillion shadow-banking system, trust financing has
been key to fueling the nation's 10% annual growth rate in the past
decade by providing easy credit to companies considered too risky by
banks. After trust loans to the property, solar, coal and other
industries tripled in the past three years to 10.9 trillion yuan($1.8
trillion).

Taiwan Protest Draws More Than 100,000 Against China Trade Deal. More
than 100,000 Taiwanese marched
in Taipei to protest a trade deal with China, challenging President Ma
Ying-jeou’s plan to improve economic relations between the political
rivals. As many as 350,000 people joined the rally yesterday in a
turnout that was “more than we expected,” said Chen Wei-ting,
a leader of students against the pact. The National Police
Agency estimated there were 116,000 demonstrators. Protesters
gathered outside the presidential office a day after Ma rejected
demands to withdraw an agreement to open Taiwan’s service
industries to competitors from China.

Asia Stocks Rise 4th Day as Consumer Shares Lead Gain. Asian stocks rose, with the regional benchmark heading for its fourth straight daily gain, as consumer shares led advances. The MSCI Asia Pacific Index climbed 0.4 percent to 137.22 as of 10:54 a.m. in Tokyo.
Japan’s Topix (TPX) index added 0.3 percent as the yen held last week’s
losses versus the dollar and even as data showed industrial production
unexpectedly fell 2.3 percent
in February from January. A three percentage-point sales-tax
increase takes effect in Japan tomorrow.

Copper Set for Biggest Quarterly Drop Since June on China. Copper fell, extending a quarterly
loss on concern that an economic slowdown in China, the biggest metals consumer, will lower demand. The metal for delivery in three months on the London Metal Exchange retreated 0.5 percent to $6,640 a metric ton by 10:05
a.m. in Hong Kong. Prices are down 9.8 percent since the start
of the year, poised for the biggest quarterly drop since June.

Flight 370 Search Gains Vessel With Black Box-Detector.
Australian ship Ocean Shield will join the hunt for the missing
Malaysian jet after being fitted with equipment to detect the black-box
recorder, as Prime Minister Tony Abbott said there was no time limit on
the search.

Latin America More Vulnerable Than Pre-2008 Crisis, IDB Says.
Latin America’s vulnerability to
external shocks is greater today than before the 2008 financial crisis
because governments have increased spending and companies have taken on
more foreign debt to fuel growth, the Inter-American Development Bank
said. “History teaches that exits from extremely low U.S. interest
rates may be smooth or bumpy,” the IDB said in a report released today
at its annual meeting in Costa do Sauipe, Brazil. “Changes to the
expected path of short-term U.S. interest rates could affect capital
inflows that have strong and
persistent effects on growth in some countries.”

Obama Changes to Health Law Illegal, McMorris Rodgers Says. President Barack Obama is “picking
and choosing” how the 2010 health-care law will be implemented
and “doesn’t have the flexibility” legally to do so,
Representative Cathy McMorris Rodgers said. Asked if she was saying such changes to the law are
illegal, McMorris Rodgers, a Republican from Washington State,
replied, “Yes, I am.”

GM(GM) Widens Ignition Recall by 971,000 to 2.59 Million Cars. General Motors Co. (GM) is expanding the recall of small-car ignition switches by 971,000
vehicles worldwide to cover 2008 to 2011 vehicles that were built with
safe parts yet may have received faulty replacements. It also increased
the death toll linked to the switches.

High-Speed Traders Rip Investors Off, Michael Lewis Says. The U.S. stock market is a rigged
game where high-frequency traders with advanced computers make tens of billions of dollars by jumping in front of investors, according to author Michael Lewis, who spent the past year
researching the topic for his new book “Flash Boys.”

Investors Breathe Life Into European Banks' Bad Loans. Lack of Restructuring in U.S. Has Driven Up Demand. Hedge funds and private-equity investors are bidding up prices of some
troubled assets in Europe, sparking a surge in sales by banks seeking to
rid themselves of soured corporate loans.

Fox News:

Rogers: Troop movement, 'covert operation' suggests Putin not finished in Ukraine. Russian President Vladimir Putin is showing telltale signs that he
intends to extend his control over Ukraine and perhaps elsewhere in
Eastern Europe, House Intelligence Committee Chairman Rep. Mike Rogers
said Sunday. Beyond assembling military armor and tens of thousands of troops
along the Russia-Ukraine border, Putin is moving troops in northern
Georgia and planting intelligence officers in Ukraine, the Michigan
Republican told “Fox News Sunday.” He said Russian troops in the northern region of Georgia, known as
South Ossetia, are on the move, perhaps to go into Armenia or toward the
Baltic Sea. “There’s no way I’d take this as any other way than [Putin] is working for a land bridge,” Rogers said.

Bad loan writedowns soar at China banks.
The
five biggest Chinese banks, which account for more than half of all
loans in the country, removed Rmb59bn ($9.5bn) from their books in debts
that could not be collected, according to their 2013 results. That was
up 127 per cent from 2012, and the highest since the banks were rescued
from insolvency, recapitalised and publicly listed over the past decade.
The sharp acceleration in write-offs is the latest indication of the
turbulence now buffeting China’s financial system.

Putin Wants to Regain Baltics, Finland, Former Adviser Says.
Baltics, Finland "not of Putin's agenda today or tomorrow, but it no one
stops him, the issue will come up sooner or later," Andrei Illarionov,
former adviser to Russian President Vladimir Putin, is quoted as saying.
Putin will say "Bolsheviks committed treason against Russian national
interests in 1917 by granting independence to Finland."

Korea Central News Agency:

North
Korea Says It Doesn't Rule Out 'New Form' of Nuclear Test. North Korea
will "utilize" its nuclear deterrent in its military exercises in
response to U.S. drills, its foreign ministry says in statement. The
test may take place in "a new form", the statement said.

Financial News:

Cutting RRR Would Delay China's Deleveraging Process. Using
reserve ratio tool will cause markets to get the wrong signal that
monetary policy is starting to be loosened, which is not in line with
the goal of controlling liquidity, according to a commentary on page 2
of today's Financial News written by Xu Shaofeng. China's monetary
authority currently appears to lean toward using reform for liquidity
control, such as the standing lending facility trial that started in
January and the re-lending quota in March, the commentary said. Cutting
banks reserve ratio will delay the deleveraging process of financial
institutions and enterprises considering that the nation's economy still
relies on investment and debt, the commentary said.

Caixin:

Minister Says China Faces Downward Economic Pressure. Industry
Minister Miao Wei said China still faces strong downward economic
pressure in an interview with Caixin's New Century magazine. Some reforms will be good in the long term while they may affect current economic growth, Miao said.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and commodity shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 50% net long heading into the week.

Crimea Resolution Backed by U.S. Barely Gets UN Majority. Ukraine
and its backers won support from little more than half the members of
the United Nations General Assembly to declare invalid Crimea’s
referendum to secede, as Russia wielded diplomatic and economic pressure
for members to abstain or cast no ballot. The
193-member General Assembly voted 100-11 today to pass a nonbinding
resolution describing the Crimean referendum as “having no validity” and
calling on all states and agencies to not recognize “any alteration of
the status” of Crimea. Fifty-eight members abstained, and 24 were
absent.

Ukrainian Bailout to Test Cabinet's Mettle Amid Threats. An hour after Ukraine’s lawmakers
yesterday passed the laws needed to unlock a $27 billion
international lifeline, protesters chanting “Revolution!”
gathered by parliament, forcing deputies to evacuate. The demonstration, sparked by one of the nationalist Pravyi
Sektor group’s leaders being killed in a firefight with police
this week, shows the extent of the challenges Ukraine new
leaders must overcome to keep the bailout money flowing.

China’s Developers Face Shakeout as Easy Money Ends: Mortgages. The collapse of a Chinese developer in a city south of
Shanghai foreshadows a shakeout among the nation’s almost 90,000 real
estate companies as the government reins in credit and the housing
market slows. Zhejiang Xingrun Real Estate Co., a closely held
developer based in Fenghua, is insolvent, with 3.5 billion yuan ($562
million) of debt. Its residential projects have been halted and
authorities have detained its largest shareholder and his son, according
to the city’s government.

Japan Inflation Unchanged in February Before Sales-Tax Rise.
Japan’s inflation rate matched forecasts in February ahead of a
sales-tax increase next week that could challenge the Bank of Japan’s
effort to stoke 2 percent price gains. Consumer prices excluding
fresh food rose 1.3 percent from a year earlier, the statistics bureau
said today in Tokyo, matching the median estimate of 30 economists surveyed by Bloomberg News on the BOJ’s key inflation gauge. Household spending fell for the first time in six months and retail sales slowed, while the jobless rate dropped to 3.6%, other data released today show.

Japan Is Taxing Itself Into Trouble. On April 1, Japan's national sales tax will rise to 8 percent from 5
percent. Unless wages rise by an equal amount, the effect will be a drop
in consumer spending. Japanese automakers anticipate a sales decline
of as much as 16 percent during the next 12 months. Even if this isn't
enough to push the economy into recession, raising the sales tax is a
bad move that will
undermine Prime Minister Shinzo Abe's agenda for the world's
third-largest economy.

Asian Stocks Swing. Asian stocks swung between gains and losses, with the regional benchmark heading for its biggest
weekly increase since September. Telecommunication shares led
declines while banks and brokerages led gains.
The MSCI Asia Pacific Index fell 0.1 percent to 135.93 as
of 9:32 a.m. in Tokyo after rising less than 0.1 percent.

Wall Street Journal:

Russian Buildup Stokes Worries. Pentagon Alarmed as Troops Mass Near Ukraine Border. Russian troops amassing near Ukraine are
actively concealing their positions and establishing supply lines that
could be used in a prolonged deployment, ratcheting up concerns that
Moscow is preparing for another major incursion and not conducting
exercises as it claims, U.S. officials said. Such
an incursion could take place without warning because Russia has
already deployed the array of military forces needed for such an
operation, say officials briefed on the latest U.S. intelligence. The
rapid speed of the Russian military buildup and the efforts to
camouflage the forces and equipment have stoked U.S. fears, in part
because American intelligence agencies have struggled to assess Russian
President Vladimir Putin's specific intentions.

Restoration Hardware(RH) swings to profit.
Restoration Hardware Holdings Inc. swung to a fiscal fourth-quarter
profit as the high-end-home-goods retailer reported continued sales
growth and said it had hired retail
veteran Doug Diemoz as its chief development officer.

U.S. high-frequency trading ban unlikely -Nasdaq. U.S. regulators
are unlikely to put rules in place that would harm high-frequency
trading (HFT) as doing so would make trading more difficult and
expensive for all investors, Robert Greifeld, chief executive officer of
Nasdaq OMX Group said on Thursday.

GameStop(GME) shares fall as 2014 forecast disappoints. Video game retailer GameStop Corp
on Thursday forecast full-year earnings below market
expectations as it is yet to see an uptick in sagging video game
software sales, despite robust hardware sales driven by the
launches of Microsoft's Xbox One and Sony's PlayStation 4
consoles.

The
Obama administration will press ahead Friday with tough requirements
for new coal-fired power plants, moving to impose for the first time
strict limits on the pollution blamed for global warming.
The proposal would help reshape where Americans get electricity, away
from a coal-dependent past into a future fired by cleaner sources of
energy. It's also a key step in President Barack Obama's global warming
plans, because it would help end what he called "the limitless dumping
of carbon pollution" from power plants.Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

UN: 400,000 Displaced This Year in Iraq Violence. The United Nations envoy to Iraq says about 400,000 people have been
displaced this year by ongoing violence in western Iraq, and the U.N.
Security Council is expressing "grave concern" about recent developments
particularly in Ramadi and Fallujah.

Personal Income for February is estimated to rise +.3% versus a +.3% gain in January.

Personal Spending for February is estimated to rise +.3% in February versus a +.4% gain in January.

The PCE Core for February is estimated to rise +.1% versus a +.1% gain in January.

9:55 am EST

Final Univ. of Mich. Consumer Confidence for March is estimated to rise to 80.5 versus a prior estimate of 79.9.

Upcoming Splits

(MLI) 2-for-1

(INSY) 3-for-2

(EOG) 2-for-1

Other Potential Market Movers

The Fed's George speaking, UK GDP, German CPI and (DRI) investor conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted
by tech and real estate shares in the region. I expect US stocks
to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

The positions and strategies discussed on BETWEEN THE HEDGES are offered for entertainment purposes only and are in no way intended to serve as personal investing advice. Readers should not make any investment decision without first conducting their own thorough due diligence. Readers should assume the editor of this blog holds a position in any securities discussed, recommended or panned. While the information provided is obtained from sources believed to be reliable, its accuracy or completeness cannot be guaranteed, nor can this publication be, in anyway, considered liable for the investment performance of any securities or strategies discussed.